Weight is lifting from the NZ economy

Akl_CBD_colin_620x310The New Zealand economy is predicted to grow despite a dip in dairy prices.

New Zealand business leaders are relishing the prospect of operating in a benign, stable and growing economy for the first time this decade.

This recovery has only just begun. Yes, we’re already talking about a dip in the rate of growth as dairy prices fall, but forecasts for an extended period of moderate growth remain.

After running lean for about five years in the wake of the financial crisis, many businesses are now pushing forward with the kind of growth and transformation strategies they need to meet a rapidly changing market.

Take a look at some of the big results in this year’s Mood of the Boardroom survey. They all point to a more optimistic, more exciting outlook from the top of the business world. More than three quarters of respondents expect revenue to grow in the next 12 months. Nearly 60 per cent expect to increase staffing levels. Just 13 per cent expect to contract. And more than half expect to authorise more spending on capital expenditure.

Most businesses face more than enough challenges thanks to the disruptive influence of technology.Which is why the global financial crisis, and defensive stance businesses were forced to take in response to it, was such a drag – not just for workers but for managers, executives and all the way to the boardroom.

When it comes to structural challenges media get all the attention, but from retailing to manufacturing there aren’t many parts of the economy untouched by the internet revolution.

Companies have to evolve constantly and position themselves to respond to cultural trends that move at a breakneck speed. Business leadership needs to be dynamic and bold – now more than ever.

That shouldn’t be something to fear. It is exciting and challenging, without the grim weight of economic doom hanging over the world.

Take a look at the big strategic challenges business leaders are highlighting this year. Managing talent gets the most focus, followed by optimising digital structure and then addressing organisational structure third.

Addressing capital structure is highlighted as a major strategic challenge by just 30 per cent of respondents and dealing with risk management by less than half. That is a very good sign. Suddenly it is starting to feel like a weight is lifting.

Of course, this does not signal a return to the rampant borrow and spend days of the pre-GFC boom.

After several years of stagnation, there is still caution and risk aversion. We’re going to need a steady and sustained period of growth to make the corporate changes New Zealand needs.

And that is one of the reasons that business leaders are reluctant to see political change right now.

Stability feels good to business at the moment, and the incumbent political party naturally has that on its side. In this kind of environment the onus is on the Opposition to convince voters it will not derail the recovery.

It is clear from this survey that, despite some policies many in the business world have some sympathy for, David Cunliffe and the Labour Party have not got business on side.

This year the Opposition parties are up against a compelling economic narrative. One that even the allegations and controversy of the past few weeks has not blunted.

At the other end of the political spectrum even the Act Party seems to face this problem, with the appetite for free-market reform far from what it was through the 1980s and 1990s.

New Zealand business has just been through the toughest cyclical downturn in generation.

It is running lean and fitter for the experience.

Our corporate leaders aren’t looking for radical polices. They are backing themselves to perform in benign conditions. They are looking for a Government that doesn’t get in their way. But they are open to a Government which has a vested interest in developing industry for New Zealand’s benefit.

Those on the right have attacked National for veering into the realms of corporate welfare. This is not a Government that is shy of picking winners and supporting business sectors New Zealanders want to see grow.

It is, in the end, a more pragmatic and centrist formula than many expected from a party that is led by a global currency trader.

But it is one that seems to sit well with those in our leading corporate boardrooms.


  • Liam Dann
  • NZ Herald
%d bloggers like this: